How to level the pension playing field for everyone

By Yang Chung-hsin 楊重信 /

Tue, Feb 19, 2013 - Page 8

On Jan. 30, President Ma Ying-jeou (馬英九) held a press conference to announce the government’s new pension reform plan.

Hopefully, the Chinese Nationalist Party (KMT) and the Democratic Progressive Party will be able to negotiate the issue and eventually come up with a satisfactory reform plan.

The biggest flaw with the retirement pension reforms so far has been the creation of a confrontation between military personnel, civil servants and public schoolteachers, and private-sector workers.

Private-sector workers will not receive more as government employees start to receive less, and because private-sector workers’ insurance premiums will gradually increase in the future, the reforms are likely to cause even greater discontent among them.

To ensure fairness for all, the government should make every effort to take good care of private-sector workers.

Businesspeople may protest government plans requiring them to pay more for their employees’ pensions, and the government needs to stand its ground on this issue.

Otherwise, the pension reform plan could end up as a jumbled mess.

The Ma administration’s pension reform plan is based on a gradual approach and the government is set to conduct an overall review every five years.

According to Ma, the main purpose of the plan is to ensure the stability of pensions for the next 30 years.

However a regular review also means that Taiwanese will have to experience the painful process of reform every five years.

As far as Ma’s promise of ensuring stable pensions for the next 30 years, I cannot help but think that pensions will be somewhat less than stable once those 30 years come to an end.

The Ma administration’s pension reform plan is temporary in nature because it is aimed at delaying the bankruptcy of the nation’s pension program for at least the next 30 years.

However, in the face of the near-bankruptcy of the four major retirement funds and the Labor Insurance Fund.

The government is having a harder time appropriating funds to make up for the losses.

A large question mark hangs over whether current pension programs can keep going for another 30 years.

Today, debt across all levels of the government is as high as NT$5.8493 trillion (US$197.5 billion), accounting for 42.7 percent of the nation’s average of GDP over the past three years.

While the figure does not exceed the legal debt ceiling of 48 percent, if the hidden debt of all levels of the government –– which now stands at NT$14.9052 trillion –– is included the total amount of public debt stands in excess of NT$20 trillion, almost placing the government on the edge of a “fiscal cliff.”

The key to whether the nation’s various pension programs can remain stable for 30 years following reform lies in the government’s ability to cope with loss appropriation.

The government should take effective measures to boost economic growth.

It should be more frugal and show determination in pushing forward on tax reforms. It should also slow down the accumulation of national debt and enhance its ability in managing loss appropriation.

Otherwise, the nation’s pension program and finances will be bankrupted within 30 years and the public will suffer greatly as a result.

Yang Chung-hsin is dean of Chinese Culture University’s College of Environmental Design.